Rose Law Firm, Arkansas Power, Slips as It Steps Onto a Bigger Stage

By STEPHEN LABATON,

Published: February 26, 1994

WASHINGTON, Feb. 25—
With Hillary Rodham Clinton in the White House and three other partners taking influential jobs in the Clinton Administration, the Rose Law Firm of Little Rock, Ark., seemed to be on the verge of national prominence a year ago.

But things quickly went awry. The Rose firm, which made itself a dominant power in its home state, is now suffering under the unforgiving glare of publicity.

Vincent W. Foster Jr., one of the partners who moved to Washington, serving as a top White House lawyer, committed suicide. A coveted spot on the national scene has failed to materialize. And last month, an independent counsel opened an office in Little Rock to investigate accusations of fraud and conflicts of interest that uncomfortably keep leading back to the converted Y.W.C.A. building that is the Rose headquarters.

Instead of basking in the glory of its ties to Bill and Hillary Clinton's White House, the firm has had to hire its own lawyers to defend itself and cope with the counsel's requests for confidential files. He has ordered the firm not to shred any documents related to the Whitewater Development Company real estate venture. The Clintons were partners in Whitewater with the proprietor of a failed Arkansas savings institution. The independent counsel is investigating whether the institution, Madison Guaranty Savings and Loan Association, improperly funneled money into Whitewater or into Mr. Clinton's 1984 re-election campaign when he was Governor of Arkansas.

The Republicans on the Senate Banking Committee made the Rose firm the target of their scorn during a hearing on Thursday on savings institutions, saying the firm improperly used its connections throughout the 1980's. They denounced as a whitewash a Federal Deposit Insurance Corporation report clearing Rose of a conflict of interest in a case involving Madison Guaranty.

This morning, the chairman of the F.D.I.C ordered the conflict investigation reopened.

The turmoil and the independent counsel's request for client files has made some Rose lawyers apprehensive that they may lose some business, although so far there is no indication of defections from a list that includes most of the state's biggest companies, like Stephens Inc., one of the largest investment banks in the United States, and the Worthen Banking Corporation, the largest banking company in the state, Tyson Foods, one of the world's largest poultry companies and Walmart, the country's biggest retailer.

"It's been a roller coaster ride with its ups and its downs," Herbert C. Rule 3d, a senior partner who has been at Rose for 30 years, said in an interview in Little Rock recently. "It'll pass. It won't be like a kidney stone passing. It will just sort of drift away."

Even if that happens, the brush with power will have left some lasting wounds. After Mr. Foster killed himself in July, the firm delayed its plans to open a small office in the capital until October. "We lost our stomach for the whole idea of Washington," said Allen W. Bird 2d, the partner who opened the office. Pedigree White Shoe Firm Grew in the 80's

The Rose firm bills itself as the oldest legal establishment west of the Mississippi, tracing its history to 1820. It gets its name from a founder of the American Bar Association, U. M. Rose, who joined the firm at the end of the Civil War.

Among Arkansas firms, Rose is viewed as the whitest of the white shoes. It is dominated by white men, most of whom came from privileged families in the state and graduated from one of the two accredited law schools in the state. Only a handful of women, and no blacks, have been made partners. Law professors at the University of Arkansas at Little Rock say Rose is among the most sought-after employers by the state's top law students.

Until the mid-1970's, Rose was little more than a loose confederation of a small group of lawyers.

But it changed direction largely because of C. Joseph Giroir Jr., the first full-time securities lawyer in Little Rock, who joined Rose after doing corporate-finance work at the Securities and Exchange Commission in Washington. With his help, the firm quadrupled in size as its list of clients, a Who's Who of the Arkansas corporate elite, grew during the explosive economic growth in the 1980's.

By the early 1990's, according to Federal filings, the top partners at the firm were billing clients as much as $185 an hour, among the highest rates in the state, though considerably lower than the top rates of the large firms in bigger cities.

While Mr. Giroir forged one set of connections, another set began to grow with the hiring of the firm's first woman lawyer, Mrs. Clinton. She joined the firm as an associate in January 1977, about the time her husband was being sworn in as State Attorney General.

She became a partner at the age of 32, in 1979, just as her husband was being inaugurated as the nation's youngest governor. Little Trial Work

Although Mrs. Clinton was described as a trial lawyer in some news accounts both before and during the Presidential campaign, many former colleagues cannot remember any cases she tried, and court reporters in Little Rock say she appeared in court infrequently, perhaps as seldom as once every two or three years.